The un(der)banked is FinTech’s largest opportunity

Exhibit 6
Blockchain vs. P2P: emerging approaches to close the insurance gap
Description
Blockchain
Distributed ledgers are creating a more
efficient insurance process by reducing the
need for transactional intermediaries, and
they can reduce the cost and time of moving
funds between parties, particularly in
cross-border transactions.
P2P models
P2P models will introduce additional
flexibility within the insurance product by
better matching a broad investor base with
coverage demand. This could support a
more cost-effective product globally, and
ultimately increase coverage.
Risk transfer
Smart contracts, which are computer
programs that execute the transfer of digital
currencies or assets under certain
conditions, shift risk from the individual to
the carrier without a middleman. The
immutability of the transaction is then
verifiable for both parties.
P2P models essentially transfer and
diversify risk across a group, which often
consists of similar social communities. The
models also introduce unforeseen moral
circumstances.
Use cases
Blockchain solutions are starting to be used
to combat fraud and implement
microinsurance, two aspects needed in
developing markets.
In developing markets, P2P may be
leveraged in a way similar to microfinance
(lower-limit products) to enable broader
business development. In developed
markets, P2P insurance may allow for the
creation of new types of coverage, such as
microinsurance for small commercial
farmers.
Other considerations
The regulation of insurance and the eventual
backstop of government entities likely
create additional regulatory considerations
for insurance use cases based on
blockchain. Smaller permission-based
implementations are likely to appear, at
least initially.
P2P operators are unlikely to retain risk, so
immense scale is probably needed for any
P2P model to see success. P2P models
also stray from the long-standing actuarial
and historical data framework, which may
require regulation to ensure adequate
consumer protection.
Select companies Consuelo, Everledger Dynamis, Friendsurance, Lemonade,
Teambrella, WorldCover
Source: Strategy& analysis
Strategy&
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